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ECEM: Elcertificate market braced for reform - sources

22 Jan 2014 10:17:06 | ecem


The Nordic market for renewable electricity certificates, or elcertificates, is widely expected to undergo structural reform from next month that will push prices higher, according to market participants.

Any changes to the system are expected to be implemented from 2016.

An oversupply of elcertificates has subdued prices while a weak wholesale electricity market has been a further drag on potential investment in clean power generation ( see EDEM 27 July 2012 ).

Aware of the shortcomings in the market, the Swedish and Norwegian energy agencies are set to release an assessment of the system so far on February 11 and market participants anticipate it will lead to elcertificate quota changes.


The two Nordic countries have a joint energy strategy to source 26.4TWh of electricity generation from renewable energy sources by 2020, with financing underpinned by the elcertificates market.

Under the scheme, electricity suppliers and some consumers are required to buy elcertificates which are generated for every megawatt hour generated from qualifying renewable technologies. Quotas are determined by a percentage of electricity sales.

However a weak economic climate triggered by the late-2000s financial crisis has skewed the original calculations.

A spokesman for the Swedish Energy Agency said: “The quotas, the percentage, that electricity distributors have to cover with certificates are based on modelled and expected electricity demand.

“Electricity demand will however most likely not develop according to the models. This in turn means the demand for certificates will no longer match the target set by the government.”

He added: “In short, everyone is expecting a quota adjustment and most likely a rise in quotas this time. The amount and distribution over time is however unknown until our report is published.”

New quotas?

While the energy agency was unable to confirm whether an adjustment to the quota system would materialise it is widely anticipated that one will, with elcertificate prices already responding bullishly throughout January. Most recent ICIS assessments put prompt and curve contracts at least Swedish kronor (SKr) 10 (€1.14) above December’s values.

“So far Swedish production from older plants is above expectations and Swedish electricity consumption is below expectations. Both these factors [combined] will probably mean an increase in Swedish quotas.

“In Norway production in older plants is below expectations and electricity consumption is above expectations. These factors will probably mean a reduction in Norwegian quotas,” said a source from a renewable energy consultancy.

An elcertificates trader added he was 80% certain that the report would recommend some change in quotas.

A second source however pointed out: “An increase in quotas has already been priced into the market so if we don’t hear anything about quotas next month then prices will fall.”

The Swedish Energy Agency spokesperson said: “Factors included in the quota adjustment are historical errors in electricity demand, adjustment of electricity demand prognosis and, on top of that, some technical adjustments stemming from the start of our common market [Norway did not join the scheme until the start of 2012].” Christopher Rene

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